Germany’s fixed line market is in state of flux as Liberty Global and Vodafone, the third and fourth largest players respectively, are reportedly engaged in a bidding war for Kabel Deutschland (currently number two).

The Vodafone bid would offer the most direct cost synergies, but this would be at greater execution risk. The Liberty bid would finally reunify most of the German cable sector, but would consequently need stronger undertakings to get anti-trust clearance.

Either merger would create a strong number two triple play operator, increasing competitive pressure on Deutsche Telekom and Sky Deutschland.

In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on reques

UK residential communications revenue growth was very strong in Q1 2013, rising to 4.6% from 2.1% in the previous quarter with most of the improvement driven by improved unit ARPU growth, which turned positive for the first time since early 2011

We expect unit volume growth to remain strong for the rest of the year, although ARPU growth is likely to moderate as overlapping price increases drop out, but it is still likely to be firmer than 2012 given the continued growth of high speed broadband (at least at BT and Virgin Media) and firm pricing in general

The outlook for market shares is less certain, with a number of difficult-to-predict factors coming into play, and while we do not expect dramatic changes in market share to result from any of these factors, they do create a risk of pushing operators to adopt more aggressive pricing strategies, which would disrupt an otherwise very healthy outlook

Overall UK mobile revenue growth slipped slightly in Q1, dropping 0.4ppts to -4.3%, although, taking into account the leap year effect, underlying growth likely improved a touch, marking the second quarter of growth being at least stable

EE announced 4G subscriber figures for the first time, reporting 318k subscribers at the end of the quarter, a very respectable figure given coverage, handset and price tier limitations. We expect this figure to grow strongly as coverage rolls out and 4G handset availability spreads, but the 4G revenue premium is still unlikely to be significant in 2013

The outlook for revenue growth in the rest of 2013 is fairly positive – the MTR impact will partly drop out from Q2 onwards, boosting reported revenue by over 2ppts, some mid-contract price increases will take effect, and pricing (so far) has remained reasonably stable

As smartphones have grown in the UK, so has mobile use of social networks However, mobile messaging services that offer an alternative channel to Facebook have become almost as important Meanwhile analysis by smartphone platform shows that iPhone users continue to have a higher propensity to install and use apps than do Android users. Android skews young and lower income, and messaging apps in particular start as a means to save money (though they are now much more than that), but even in this category iPhone users appear to care more

In the past two quarters the French cable operator has seen its retail segment resuming growth after years of decline.

The improvement strengthens Numericable’s attractiveness as a consolidation partner.

Vodafone’s European revenue slowed again, with declining underlying growth compounded by increased MTR cuts, and Vodafone Red tariffs seemingly driving both reduced customer acquisition and ARPU

Vodafone is investing in 4G on a leisurely timetable, planning to upgrade only 40% of sites to 4G by March 2015, and is seemingly more concerned about securing fixed fibre access than driving mobile

The March quarter growth may mark a nadir of sorts, but we believe a return to positive growth can only come when Vodafone apes its US associate and invests substantially in its network to truly differentiate

Following a return to broadband subscriber growth last quarter, TalkTalk has now returned to overall revenue growth for the first time since acquiring Tiscali in 2009

Pay TV net adds nearly doubled to 150k; the associated SACs weighed on EBITDA, but TV did support the upper tier ‘Plus’ base returning to solid growth

TTG’s outlook is positive, save for uncertainties over regulation, and the unpredictable impact of BT Sport on broadband market shares

BT has thrown down the gauntlet to Sky, as it has launched a premium sports offering that will be free to all BT broadband customers upon its launch on 1 August 2013 The product being ‘free’ makes it a potentially effective defence of BT’s broadband base, with the possibility for win-back as well, but this also raises the direct operating losses that have to be set against these benefits The main damage to Sky comes from elevated rights costs, with there being a risk of further inflation in three years as another major round of renewals comes up

BT’s underlying revenue growth improved from -3% last quarter to around zero at both the Retail and Group level, its best performance for years, with high speed broadband helping to stabilise ARPU

BT Sport is positioned well as a defensive/win-back product against broadband losses to Sky, but BT’s ability to win triple play subscriptions off Sky is still hampered by lack of content, and the cost appears disproportionate to its aims

Fibre adoption continued to accelerate, with some important upcoming regulatory decisions the only potential barrier to fibre giving BT a very strong boost over the next few years